Creating a Rental Property in North Dakota | From Investment to Income

North Dakota Rental Property LLC

In the world of real estate investing, creating a Limited Liability Company (LLC) for rental properties has become an increasingly popular strategy for property owners in North Dakota. An LLC provides numerous benefits, including limited liability protection, potential tax advantages, and improved professional credibility. This guide will walk you through the steps to Create a Rental Property LLC in North Dakota, helping you navigate the process and ensuring your investment is well-protected and structured for success. From researching local laws and regulations to drafting a comprehensive operating agreement, we’ll provide you with the essential information to establish and manage your Rental Property LLC effectively.

To learn everything about creating a rental property in North Dakota, Webinarcare Editorial Team recommends reading the whole article until the end.

What is a Rental Property LLC?

A rental property LLC in North Dakota refers to a limited liability company (LLC) formed specifically to own, manage, and rent out residential or commercial properties in the state. Starting an LLC in North Dakota is popular with investors and property owners because they provide personal liability protection related to the property, separating the owner’s assets from any debts or legal issues that may arise concerning the property.

Creating a rental property LLC allows owners to manage their investments better, take advantage of potential tax benefits, and protect themselves from lawsuits or financial liabilities related to their real estate ventures. North Dakota has its own regulations and filing requirements for establishing an LLC, so it is vital to research and complies with the specific rules and guidelines in the desired state of operation.

Hiring the Best LLC Services in North Dakota is beneficial if you plan to create an LLC for your rental property business. They will keep you at ease and will help you with the process of making one.

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It is suggested that you speak with a legal professional before you begin setting up a rental prorperty LLC. They’ll understand what’s best for you and your future company. To safeguard your personal assets from business debts, you can always start an LLC in North Dakota.

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How to Create a Rental Property LLC in North Dakota

To create a rental property LLC in North Dakota, you must follow a few steps that include choosing a name for your LLC, hiring a Registered Agent, filing your Articles of Organization, transferring title to your North Dakota LLC, and finally, updating the lease.

Step 1: Choose a Name For Your LLC

Selecting a name for your North Dakota rental property LLC is essential to forming. Your business name should be unique, memorable, and reflective of your products or services. There is a complete guide on North Dakota Business Name Search for you to have a proper LLC business name. 

In North Dakota, your rental property LLC name must:

  • The business name should have the word LLC or L.L.C.
  • No confusion with a government entity name.
  • A unique name is needed with no match
  • Limit of restricted words that need a license. 

In North Dakota, if you do not wish to file your LLC right away but want to hold the name that you have decided on, then you can reserve your LLC name for 1 year. You must file a name reservation application with the North Dakota Secretary of State to keep the name. 

You can register your business under a different legal name if your preferred name isn’t available.  Once you have chosen a name, you can submit an application for North Dakota DBA (doing business as). In this manner, you can choose any name you desire for your business. A DBA allows a company to operate under the name of the person or entity who owns it. If you have decided to file for a DBA, you can file it in two methods, by mail and in person.

However, before filing a DBA, you should know that you need to renew your DBA every five years, which costs $25.

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Step 2: Choose a Registered Agent

The next step in forming a rental property LLC is hiring a Registered Agent who accepts legal paperwork for your business. This person or business will receive important tax forms, legal documents, all notices of lawsuits, and other official government correspondence in North Dakota. Forming an LLC and creating a rental property for your LLC will be easier if you have a Registered Agent in North Dakota. You can serve as your Registered Agent, or you can appoint a friend, family member or hire the Best North Dakota Registered Agent Services.

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Step 3: File Your LLC’s Articles of Organization

The Articles of Organization for a rental property LLC is an important document to start your limited liability company (LLC). You must have a business establishment before you have a proper rental entity in North Dakota. North Dakota Articles of Organization is a simple document that contains the business name and address and the name and address of the person who received lawsuits on behalf of the organization. In North Dakota, the filing fee is $135. 

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Step 4: Transfer Title To North Dakota Rental Property LLC

Once you have formed an LLC for your North Dakota rental property, transferring the property title to the LLC is crucial. This is an essential step to ensure that the benefits of operating your rental property through an LLC, such as limited liability protection and potential tax advantages, are fully realized.

Here are the key steps involved in transferring the property title to your LLC:

Prepare a Deed

To transfer the property title to your LLC, you must prepare a deed, a legal document conveying ownership of the property. The type of deed required for this transfer may vary depending on North Dakota laws and the specific circumstances of your property. Common deeds include warranty deeds, quitclaim deeds, and grant deeds. 

  • If you transfer title through a quitclaim deed, you are passing any interest you might have in the property to your LLC. 
  • If you would like a warranty deed, it includes a guarantee that the title was good and free of any claims or interests by third parties. 

Record the Deed

Once the deed has been prepared, it must be recorded with your state’s appropriate county recorder or land registry office. Recording the deed is essential for completing the transfer of the property title to the North Dakota LLC and ensuring that the change in ownership is part of the public record. 

Update Property Insurance

After transferring the property title to your North Dakota LLC, you will need to update your property insurance policy to reflect the change in ownership. Contact your insurance provider to inform them of the change and ensure that the LLC is listed as the property owner on the policy. This is crucial for maintaining proper coverage and protecting your investment.

Notify Your Mortgage Lender

If you have a mortgage on the property, it is essential to notify your mortgage lender of the change in ownership. Some lenders may require you to obtain their approval before transferring the property title to an LLC. Additionally, be aware of the “due-on-sale” clause in your mortgage agreement, which the transfer of property ownership may trigger. Sometimes, lenders may enforce this clause and require you to pay off the mortgage immediately. However, this is only sometimes the case, and many lenders may allow you to proceed with the transfer without issue.

Step 5: Update And Amend The Lease

Moreover, as soon as you sort out the kind of deed you want in your rental property LLC in North Dakota, you should sign and record the deed to draft and amend your lease. 

A fast and simple solution to minimize your liability for claims about the property is to transfer the property to an LLC in North Dakota. But changing the title to your property shouldn’t be your actual plan. Also, speaking with an insurance agent and securing enough liability insurance to pay for any potential claims is important. This ensures that rent payments and other responsibilities are directed to the North Dakota LLC rather than you.

Step 6: Getting Permits And Licenses

When you get a rental property LLC in North Dakota, it is mandatory to get permits and licenses from the North Dakota Secretary of State. Any permits and licenses you obtain for your North Dakota rental property LLC must be updated and compliant with the local city/county authority. 

Cost to Form an LLC in North Dakota

The cost to form an LLC in North Dakota can vary depending on several factors, such as North Dakota filing fees, Registered Agent fees, and any additional services you may require. Here’s a breakdown of the typical costs associated with forming an LLC in North Dakota:

State Filing Fees

The state filing fee is the primary expense when forming an LLC in North Dakota. This fee is paid to the North Dakota Secretary of State to process your LLC formation documents, such as the Articles of Organization. The filing fee typically costs $135, while the LLC annual fee is $50.

Read the North Dakota LLC Cost to know more about the specific cost.

Registered Agent Fees

Most states, including North Dakota, require an LLC to designate a Registered Agent. A Registered Agent is a person or company responsible for receiving legal and official documents on behalf of the LLC. You can act as your own Registered Agent or hire a Registered Agent. These services typically charge an annual fee, ranging from $50 – $150, depending on the level of service provided.

Operating Agreement

While not always required by state law, creating an Operating Agreement for your North Dakota LLC is highly recommended. An Operating Agreement outlines the LLC’s management structure, ownership percentages, and other details. You can draft an Operating Agreement, use an online template, or hire an attorney to create a customized agreement. The cost of an operating agreement can range from minimal (if using a free template) to several hundred dollars or more (if hiring a business attorney).

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Business Licenses and Permits

Depending on your North Dakota business activities and location, you may need to obtain North Dakota licenses. The costs for these licenses and permits will vary depending on the license type, the issuing authority, and the location of your North Dakota business. However, in North Dakota, the business license fee ranges from $50 – $300.

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Annual Report and Taxes

Some states, including North Dakota, may require LLCs to pay Annual fees or taxes. These fees include Annual Report filing fees, franchise taxes, or other state-specific fees. In North Dakota, here are the following costs.

  • Annual Report Filing Fee- $50
  • Franchise Tax Fee- No franchise tax
  • Sales Tax Fee- $0 (Free)

Optional Services

You may utilize additional optional services when forming an LLC, such as hiring a professional formation service, obtaining an Employer Identification Number (EIN) in North Dakota, or registering your business name as a trademark. These services range from free (obtaining an EIN) to several hundred dollars.

Benefits of Creating a Rental Property LLC

Creating a Limited Liability Company (LLC) for rental properties in North Dakota offers several benefits. North Dakota LLC is a business structure that combines a partnership’s flexibility with a corporation’s limited liability protection. Here are some key advantages of establishing an LLC for your rental properties:

Limited Liability Protection

One of the main benefits of creating an LLC for rental properties is its limited liability protection. As an LLC owner, your assets are protected from the debts and liabilities of the rental property. Should any legal issues arise, such as a tenant lawsuit or property damage claim, your assets, such as your home, personal bank accounts, and other investments, are generally not at risk.

Tax Advantages

LLC offers potential tax benefits for rental property owners in North Dakota. By default, an LLC is considered a pass-through entity, meaning the profits and losses from the rental properties pass through to the owners’ tax returns. This avoids the double taxation that occurs with corporations. Additionally, rental property owners may take advantage of tax deductions for expenses related to the property, such as mortgage interest, property taxes, maintenance, and repairs.

Easier Management

Managing rental properties through an LLC can simplify ownership and make it easier to manage multiple properties. You can streamline bookkeeping, tax reporting, and other administrative tasks with an LLC. If you own multiple rental properties, you can consolidate them by creating a Single-Member LLC in North Dakota.

Professional Image

Operating your rental properties through an LLC can enhance your professional image and credibility with tenants, lenders, and other business partners. It demonstrates that you are serious about your real estate investments and are committed to maintaining high standards of professionalism and business practices.

Flexibility in Ownership and Management

North Dakota LLC offers flexibility in ownership and management structures. You can have multiple members in your North Dakota LLC, allowing you to bring in partners or investors. Additionally, an LLC can have different classes of membership interests, enabling you to allocate profits and losses in various ways among the members.

Estate Planning Benefits

North Dakota LLC can provide estate planning benefits for rental property owners in North Dakota. Transferring rental properties into an LLC allows you to pass ownership interests to your heirs without probate easily. This can simplify transferring assets and minimize potential disputes among beneficiaries.

FAQs

What is an LLC?
An LLC stands for Limited Liability Company.
What benefits does an LLC offer to rental property owners in North Dakota?
LLC offers limited liability, reduced taxes, and legal protections to rental property owners in North Dakota.
What are the requirements for creating an LLC for rental property in North Dakota?
To form an LLC in North Dakota, you need to file Articles of Organization with the Secretary of State.
Can a non-resident create and own an LLC for rental property in North Dakota?
Yes, a non-resident can create and own an LLC for rental property in North Dakota. However, they must appoint a North Dakota registered agent for their LLC.
What is a registered agent?
A registered agent is a person or entity appointed to receive legal and tax documents on behalf of an LLC.
Can a rental property LLC in North Dakota be managed by one person?
Yes, a rental property LLC in North Dakota can be managed by a single member if desired.
How do I register an LLC EIN for my rental property in North Dakota?
You can register for an LLC EIN with the IRS by filing an online application or mailing a form to their office.
What taxes will my LLC rental property be subject to in North Dakota?
Your LLC rental property will be subject to North Dakota corporate income tax, sales tax, and property tax.
How often do I need to file an annual report for my LLC rental property in North Dakota?
You need to file an annual report with the North Dakota Secretary of State every year.
How much does it cost to register an LLC for rental property in North Dakota?
It costs $135 to register an LLC for rental property in North Dakota.
Can I change the name of my rental property LLC in North Dakota after registration?
Yes, you can change the name of your rental property LLC in North Dakota with the Secretary of State by amending your Articles of Organization.
What are the benefits of appointing a registered agent for my rental property LLC in North Dakota?
A registered agent provides legal protection, ensures compliance with state laws, and prevents lawsuits against may not be served.
Can a rental property LLC own multiple properties in North Dakota?
Yes, a rental property LLC can own multiple properties in North Dakota.
How long does it take to register an LLC for rental property in North Dakota?
It typically takes 5-10 business days to register an LLC for rental property in North Dakota.
Will I be taxed personally for owning an LLC for rental property in North Dakota?
No, you will not be personally liable for taxes owed by your rental property LLC in North Dakota.
Can I have a partner in my rental property LLC in North Dakota?
Yes, you can have one or more partners in your rental property LLC in North Dakota.
Does North Dakota offer any tax incentives for owning rental property through an LLC?
Yes, North Dakota may offer tax incentives for owning rental property through an LLC in certain situations.
Do I need to have a physical office in North Dakota to create an LLC for rental property in the state?
No, you do not need to have a physical office in North Dakota to create an LLC for rental property in the state.
How do I dissolve my LLC rental property in North Dakota?
You can dissolve your LLC rental property in North Dakota by filing Articles of Dissolution form with the Secretary of State.
What should I consider when choosing a registered agent for my LLC rental property in North Dakota?
You should consider factors such as reputation, reliability, and affordability when choosing a registered agent for your LLC rental property in North Dakota.
Can I change the structure of my LLC rental property in North Dakota after creation?
Yes, you can change the structure of your LLC rental property in North Dakota with the approval of all members.
Do I need to pay for a business license to operate a rental property LLC in North Dakota?
Depending on the area in North Dakota you operate in, you may be required to obtain a business license to operate a rental property LLC.
Can an LLC rental property be converted into a corporation in North Dakota?
Yes, an LLC rental property can be converted into a corporation in North Dakota with the approval of all members.
Can a rental property LLC in North Dakota operate outside of the state?
Yes, a rental property LLC in North Dakota can operate outside the state in other jurisdictions.
What is the liability limit for members of a rental property LLC in North Dakota?
Members of a rental property LLC in North Dakota have a limited liability that is equal to their investment in the company.
How do I open a business bank account for my rental property LLC in North Dakota?
To open a business bank account for your rental property LLC in North Dakota, you will need to submit your Articles of Organization and Employer Identification Number to the bank.
Can I own a rental property LLC in North Dakota if I have a criminal record?
In North Dakota, your criminal record may be reviewed as part of your application to create an LLC rental property. However, it may not necessarily disqualify you from owning an LLC.
Can a rental property LLC in North Dakota be exempt from state income tax?
Certain rental property LLCs in North Dakota may qualify for state income tax exemptions, based on criteria such as size and location.
What is a rental property LLC?
Rental property LLC stands for a limited liability company that owns rental property.
Why do people create rental property LLCs?
People create rental property LLCs to keep their rental property separate from their personal property and reduce their personal liability.
What are the advantages of creating a rental property LLC?
The advantages of creating a rental property LLC include tax benefits, limited liability protection, easier access to capital, and enhanced credibility.
How do I form a rental property LLC in North Dakota?
To form a rental property LLC in North Dakota, you need to file Articles of Organization with the North Dakota Secretary of State’s office, pay a fee, and obtain a registered agent.
What is a registered agent in North Dakota?
A registered agent in North Dakota is a person or entity authorized to accept legal documents on behalf of an LLC.
How much does it cost to form a rental property LLC in North Dakota?
It costs $135 to form a rental property LLC in North Dakota.
What information do I need to provide to form a rental property LLC in North Dakota?
To form a rental property LLC in North Dakota, you need to provide the LLC’s name, duration, purpose, principal place of business, registered agent, and members.
How long does it take to form a rental property LLC in North Dakota?
It takes about 3-5 business days to form a rental property LLC in North Dakota.
Can I form a rental property LLC on my own in North Dakota?
Yes, you can form a rental property LLC on your own in North Dakota by following the state’s requirements.
Do I need a lawyer to form a rental property LLC in North Dakota?
No, you do not need a lawyer to form a rental property LLC in North Dakota, but you may want to hire one to ensure compliance with all relevant laws and regulations.
What taxes do I need to pay for a rental property LLC in North Dakota?
You need to pay North Dakota state income tax, federal income tax, and self-employment tax for rental property LLCs in North Dakota.
What are the ongoing compliance requirements for rental property LLCs in North Dakota?
The ongoing compliance requirements for rental property LLCs in North Dakota include filing an annual report and paying an annual fee.
Can I use my rental property LLC in North Dakota for personal expenses?
No, you cannot use your rental property LLC in North Dakota for personal expenses because it is a separate legal entity.
How much liability protection does a rental property LLC provide in North Dakota?
A rental property LLC provides limited liability protection, which means your personal assets are separate from your business assets and not at risk if your LLC is sued.
Can multiple people own a rental property LLC in North Dakota?
Yes, multiple people can own a rental property LLC in North Dakota, and they are called members.
Can I transfer ownership of my rental property LLC in North Dakota?
Yes, you can transfer ownership of your rental property LLC in North Dakota by following the state’s requirements.
What happens if I do not pay my rental property LLC’s annual fee in North Dakota?
If you do not pay your rental property LLC’s annual fee in North Dakota, your LLC will be dissolved.
Can I have a rental property LLC and still work a regular job in North Dakota?
Yes, you can have a rental property LLC and still work a regular job in North Dakota.
Do I need to live in North Dakota to create a rental property LLC in North Dakota?
No, you do not need to live in North Dakota to create a rental property LLC in North Dakota.
Can I use my rental property LLC to invest in real estate in other states besides North Dakota?
Yes, you can use your rental property LLC to invest in real estate in other states besides North Dakota.
How do I open a bank account for my rental property LLC in North Dakota?
To open a bank account for your rental property LLC in North Dakota, you need to provide your LLC’s Articles of Organization, EIN, and meeting minutes, among other documentation.
What is an EIN in North Dakota?
An EIN in North Dakota is an Employer Identification Number, which is a nine-digit tax identification number issued by the IRS to businesses to identify their tax accounts.
Can I use my personal bank account for my rental property LLC in North Dakota?
No, you cannot use your personal bank account for your rental property LLC in North Dakota.
Can I dissolve my rental property LLC in North Dakota?
Yes, you can dissolve your rental property LLC in North Dakota by filing Articles of Dissolution with the state.
What are the benefits of dissolving a rental property LLC in North Dakota?
The benefits of dissolving a rental property LLC in North Dakota include no more compliance requirements, no more liability protection, and no more financial responsibility.
Do I need to file for a certificate of authority if I want to rent out my North Dakota rental property LLC to tenants from other states?
Yes, you need to file for a certificate of authority if you want to rent out your North Dakota rental property LLC to tenants from other states.
How do I renew my annual report for my North Dakota rental property LLC?
To renew your annual report for your North Dakota rental property LLC, you need to file an annual report and pay an annual fee.
Can I own multiple rental property LLCs in North Dakota?
Yes, you can own multiple rental property LLCs in North Dakota.

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Conclusion

Creating a rental property in North Dakota requires careful planning, research, and execution. By following these steps, you can create a successful rental property that generates passive income and provides valuable housing to tenants. Remain diligent and proactive in managing your property to ensure long-term success in the competitive rental market. Ensure the details and records are accurate and precise with the previous filing documentation. And if you have any questions, share them in the comment section below.

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